When the future dictates the present

March 25, 2016

Intellectual Property Alert

Author(s): Ronald I. Eisenstein

On March 18, 2016, the Federal Circuit Court of Appeals issued an eagerly anticipated decision in the consolidated case Acorda Therapeutics, Inc. v. Mylan Pharmaceuticals, Inc., 2016 U.S. App. LEXIS 4942 (2016), finding that generic drug makers filing abbreviated new drug applications (ANDAs) under the Hatch-Waxman Act can be sued by branded patent holders in jurisdictions where the generic has “plans to engage in marketing of the proposed generic drug.” In the court’s view, specific personal jurisdiction can be based not only upon actual minimum forum contacts, but prospective, case-related contacts with the forum state. Given the product at issue—nationally, if not globally, marketed generic drugs and drug/device combinations—these prospective contacts are ubiquitous. The ruling raises concerns about a new mode of forum shopping.

But doesn’t this make perfect sense, you say. After all, time is a flat circle and everything the generics have ever done or will do, they are going to do over and over again. Let’s hold the bumper-sticker metaphysics for just a second though (with all due respect to Rust Cohle)[1]—this is the law we’re talking about and those that construe it are bound by precedent more so than even logic, right? Let us test that premise. Can the “minimum contacts” threshold for personal jurisdiction be met by “contacts” that have yet to occur? For products that may or may not ever be approved by FDA? For sales that may or may not be made? The Federal Circuit tells us “yes” in Mylan, but its reasoning, intuitive as it may be, is less clear than its answer.

The decision addressed two partially conflicting decisions from separate actions with Mylan, the common defendant. In each case Mylan had been sued by a branded maker in the District of Delaware after it certified, as part of an ANDA, that the branded makers’ patents were invalid or would not be infringed by Mylan’s proposed generic. In one case, AstraZeneca’s type II diabetes drugs Onglyza® and Kombiglyze™ were the branded incumbents. In the other, Mylan was sued by Acorda Therapeutics and Alkermes Pharma Ireland following its ANDA seeking to market a generic version of Acorda’s multiple sclerosis drug Ampyra®. Mylan moved to dismiss in each case based on a lack of personal jurisdiction. It lost on both occasions, but for slightly different reasons.

In both cases, the lower court found that Mylan had sufficient “contacts” with Delaware to establish specific personal jurisdiction—i.e., contacts that were specific to the subject matter of the cases themselves. In the AstraZeneca case, the presiding judge saw Mylan’s issuance of its Paragraph IV notification to AstraZeneca—a corporate resident of Delaware—as the operative contact with the state. In the Acorda case, it was the prospective injury to Acorda, an entity incorporated under the laws of Delaware, that tipped the same scale. Where the trial judges differed, however, was in their parallel assessment of general personal jurisdiction in light of the Supreme Court’s landmark decision of Daimler AG v. Bauman, 134 S.Ct. 746 (2014). In Acorda, the judge held that despite Daimler’s oft repeated “at home” standard for general personal jurisdiction, Mylan’s registration to do business in Delaware illustrated its consent to general personal jurisdiction. The AstraZeneca Court did not go so far, holding that registration to do business was insufficient under Daimler. The split was set and the questions posed—was the patent holder’s locus of incorporation or residence enough for specific jurisdiction; could registration to do business in a forum possibly be enough for consent to general jurisdiction?

Steering clear of Daimler, the Federal Circuit declined to “address the issue of general personal jurisdiction.” In addressing the bounds of specific personal jurisdiction, the Federal Circuit agreed with the lower court in each case, but drew new focus to the prospective in-forum sales of the proposed generic drug as the deciding factor in satisfying the “minimum-contacts standard.” The court held that the standard was met by “the particular actions Mylan has already taken—its ANDA filings—for the purpose of engaging in that injury-causing and allegedly wrongful marketing conduct in Delaware.” Those acts, the court went on, “reliably indicate plans to engage in marketing of the proposed generic drugs” and “Delaware is undisputedly a [s]tate where Mylan will engage in that marketing if the ANDAs are approved.”

The logical hurdle for the court was a temporal one. As it readily acknowledged, the governing standard for the minimum-contacts requirement is evaluated in terms of activities “purposefully directed’…at the forum,” where “’the litigation results from alleged injuries that ‘arise out of or relate to’ those activities.’” The court, as it must, dismissed the Supreme Court’s tense as “worded to address suits for retrospective relief based on past acts,” choosing to set aside the suggestion that “a rigid past/future dividing line governs the minimum-contacts standard.” The future in this circumstance can, according to the Federal Circuit, dictate the present.

As the court points out, that notion is not without intuitive appeal. The court, for example, analogizes this “link” between the present and anticipated future acts to cases “where we have discussed why the litigation authorized by [Hatch-Waxman] meets Article III’s requirement of a case or controversy.” The court also pointed to Mylan’s admissions that it, indeed, “plans to market its proposed drugs in Delaware.” Such unique circumstances, arising from Mylan’s “artificial act of infringement” under Hatch-Waxman, required a unique result in the court’s view.

While there is no doubt the Federal Circuit had its reasons, its decision is borne more from common sense than precedential authority. While that may not trouble the practical among us, the policy implications may. The Federal Circuit’s reasoning effectively renders specific personal jurisdiction in the ANDA context quite general. In fact, taken to its logical conclusion the number of forums an ANDA filer avails itself of by simply applying to FDA for approval is now limited only by its own ambition—i.e., the jurisdictions in which it intends to sell its yet-to-be-approved product. Is that reason enough to restrain one’s sales footprint? Not likely. So, we are left with something akin to nationwide personal jurisdiction for ANDA filers. Forum shopping will occur. The Supreme Court will no doubt soon decide whether or not that practice will last. Until then, it’s off to the Eastern District of Texas, the Eastern District of Virginia, Delaware, New Jersey, or wherever it is the branded makers prefer most.

A copy of the Federal Circuit’s decision in its entirety is available here.

  1. To those who have not indulged and those who have, unthinkably, forgotten, Rust Cohle is the tenacious detective and brooding amateur philosopher from Season 1 of HBO’s True Detective (played by Matthew McConaughey).
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